Journal of Applied Economics Studies in Iran

Journal of Applied Economics Studies in Iran

The Effect of Real Exchange Rate on Economic Complexity With Emphasis on Structural Changes in Iran

Document Type : Research Article

Authors
Maryam Sayaf Dezfoli 1
Ebrahim Anvari 2
Ahmad Salahmanesh 1
Behroz Sadeghi 1
1 Department of Economics, Faculty of Economics and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran.
2 Department of Economics, Faculty of Economics and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran (Corresponding Author).
10.22084/aes.2026.32333.3887
Abstract
Since a more diversified and exclusive production structure is associated with a high level of industrialization, variables that affect the share of industry in GDP also affect the economic complexity and production capacities of countries. One of these variables is the exchange rate. Changes in the exchange rate, by increasing the cost of imported inputs, reduce the diversity of exports in the short term and have a negative effect on economic complexity. In this study, the effect of the real exchange rate on economic complexity with an emphasis on structural changes in the Iranian economy is examined using the Bayesian averaging method during the period 1974-1979. Accordingly, first, the structural change index in the Iranian economy is extracted using the principal components method and eleven economic, social, and political variables. Then, using this variable and other variables such as GDP per capita, government final consumption expenditure, degree of trade openness, natural resource rent, financial depth, population density, and education, the analysis is carried out. According to the model results, the economic complexity index is affected by three key variables: the intensity of structural change, the real exchange rate, and GDP per capita. The effect of structural change on economic complexity is negative and very weak. This factor can be related to the lack of attention to highly complex and high-tech export sectors in the industrialization process, which indicates dependence on limited and low-diversity goods. In other words, weak structural change or specific structural changes can prevent the promotion of economic complexity. In contrast, the real exchange rate has a positive effect, albeit with high uncertainty, on economic complexity, which is consistent with another research. This factor can indicate the moderating role of competitiveness in promoting the export structure.
Keywords
Real Exchange Rate
Structural Changes
Economic Complexity
Principal Component Analysis (PCA)
Bayesian Averaging (BMA)
Subjects
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Journal of Applied Economics Studies in Iran
Volume 15, Issue 58
Summer 2026
Pages 147-181